Phew! The 2021 tax season has been one for the history books, and hopefully it will prove to be a once-in-a-lifetime anomaly. Though the May 17 parade has come and gone, the extraordinary 2021 tax season continues, as firms sweep up after the big event.
The wind-down is taking some time, as accountants allow the space to gather supporting information and fund retirement accounts before filing the actual returns on extension. Our conversations with tax firms reveal that many are still carrying workloads of 40-plus hours per week in billable work related to tax extensions, state and local filing requirements, sales tax reporting, IRS follow-up related to delayed refunds and working client issues related to PPP.
Strategic priorities for the second half of the year
As tax season winds down, tax accountants are looking forward to taking a well-earned break before resuming a more normal work schedule. After a few planned days or weeks on a beach or trail-riding, what will your firm’s priorities be?
Firms often target summer initiatives for selecting and implementing new technology. If your firm needs to upgrade its practice management tools, improve remote work capabilities or add client-facing enhancements, such as online payments, it’s a great time to do that.
A 40-hour annual CPE education requirement takes significant time and would be a real drain if left until the end of the year. Accountants tell us that post-tax season months in summer and fall are the part of the year when they put effort into earning education hours.
Building out advisory service offerings
While the post-season tasks are important, carve out time to do some strategic planning for the coming year. For most firms, that will involve a post-season assessment of what went well and where the holes are in workflows, processes and definition of services. For many firms this will also involve discussions around opportunities in advisory services and specialization.
Though many firms report they mostly do compliance work, not advisory, often they are not recognizing that the pandemic pulled them into advisory services without a formal effort on their part. Many tax firms report helping clients — both businesses and individuals — to interpret financial data, put together budgets, deal with issues involving hiring, furloughs and compensation, assist with PPP loans and relief programs, as well as make recommendations for tax-effective operations. This trend toward advisory services had been going on long before the pandemic, but the shake-up in industry calendars, pandemic-related financial programs and remote work accelerated the move to advisory services over the past 18 months.
Specialize to be competitive
Providing advisory services requires a decision to focus on a specific niche, segment or industry sector. It could be wealth management, philanthropic financial services, or tax and accounting services for businesses and owners in a particular industry, such as manufacturing, real estate, medical or hospitality services.
Your chosen specialty may be a field where you have previous experience outside of accounting. Or it may be that you have gained some industry knowledge while working with a few current clients in a particular segment. The effort to build a specialty focus takes time — a few years, perhaps. But the results are well worth the focused effort. Among the benefits that can be realized:
Access to a pool of experts: Practice specialists have a tendency to network with other professionals in their industry. This added benefit provides outreach to a wider network of specialized advisors. A CPA specializing in real estate, for example, will develop relationships with mortgage lenders, title companies and inspection services. In the case of financial negotiations related to loans and closings, this person will have the experience to manage it to an optimal resolution for the client.
Growth in valued expertise: The more of a particular type of business a CPA supports, the more informed that professional will be in advisory services. A CPA firm focused on the cannabis industry, for example, will build knowledge to advise clients on cash-only financial management in states that have not legalized recreational use and stay on top of changing banking rules in states that have. When you specialize, that segment-specific knowledge will have value for every other cannabis client you take on.
Greater efficiency: Regulatory requirements, documents, workflows and filing deadlines become rote knowledge over time. An accounting firm focused on farming operations, for example, adds value through knowledge of the evolving regulations and unpredictable market conditions in agribusinesses.
Agriculture professionals make frequent business and financial decisions related to growing season supplies and inventory, revenue and cash flow projections based on growing seasons and their tax impacts. A deeper niche for some firms within agriculture is in the winery business, which has unique needs in cost accounting and forecasting. Becoming an expert in a particular segment makes an accounting team particularly valuable. When you understand those complexities, your advice can be more forward-looking and strategic, not constrained to taxes.
Increased profitability: A specialty focus can be more profitable than a general practice. The efficiencies brought by knowledge and experience, combined with effective practice management and document automation tools, allow accountants to handle more clients and boost realization rates. Marketing becomes more effective, as you can be more targeted with services and messaging. Participation in industry organizations, events and speaking engagements further strengthen your expertise and reputation.
Advisory services: specialized knowledge brings rewards
The rapid rate of technology change in business — including cloud applications, remote work, cybersecurity and automation — requires you to proactively study that industry and the tools that create this business information. Join industry events and read industry journals to spot new trends and opportunities. Share what you have learned with your team. To effectively advise your clients, it is important to serve as an educator as well as a service provider. Doing so engenders trust and mutual respect.
Nicole Fluty is product manager for OfficeTools at AbacusNext, with over a decade of experience with OfficeTools. She directs and manages rollouts for new features and quarterly public updates delivered to thousands of users. She travels the country, meeting with accounting professionals to better understand their challenges and design practical solutions.
